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Predictive Analytics Chap 1

Uploaded by

jojojonelm
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© © All Rights Reserved
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SYLLABUS

Course Objectives: This course is devoted to predictive


analytics education by covering key concepts of
statistical learning. It provides the transition from
mathematical statistics to predictive analytics and its
applications. It covers the regression and time series
topics as well as generalized linear models, principal
component analysis, decision tree models, and cluster
analysis.
SYLLABUS
WEEK TOPICS
WEEK 2 Intro to Predictive Analytics
TOPICS TO BE DISCUSSED
WEEK 3 Model Development Process
Week 4-5 Linear Regression
Week 6 Model Performance Evaluation Concepts
and Tools
Week 7 Logistic Regression
Week 8 Midterm Exam
Week 9 Classification of Trees and Application
Week 10 Classification Trees and Application
Week 11 Neural Networks and Application
Week 12 Forecasting and Time Series
Week 13 Advanced Issues in Predictive Analytics
Week 14 Final Exam
Predictive Analytics for Marketing

By Dr. Ash Pahwa

Lesson 1: Introduction to Predictive Analytics


Lesson 1.1: What is Predictive Analytics?

1
Analytics  Big Data (where does it come from?)

Name Symbol Value


Kilo Byte kB 103
Mega Byte MB 106
Giga Byte GB 109
Tera Byte TB 1012

Peta Byte PB 1015

Exa Byte EB 1018

Zetta Byte ZB 1021

Yotta Byte YB 1024

Bronto Byte BB 1027

Gego Byte GeB 1030

4
What is Analytics?
 It is the process of using computational methods to discover
and report inferential patterns in data
 Goal: to gain insight for better/faster decisions
 The terms “Analytics” became popular in 2005 with “Google
Analytics”, and then broaden its scope
 Although the term Analytics is relatively new, the concepts
and
motivations behind Analytics is not new
 It is in fact a new name for good old fashion decision

support systems, data mining, pattern recognition, etc.

5
Why Sudden Popularity of
Analytics?
 Need
 Globalization – competing with the rest of the world

 Constantly changing customer needs/wants

 Availability and Affordability


 Capable hardware and software for data collection and data

analytics
 Automated data collection, in-memory processing

 Cultural Change
 Fact/data driven management and decision making

6
Application Areas for Analytics
 Business (customers, products, operations, etc.)
 Manufacturing (Effectiveness and Efficiency)
 Healthcare/Medicine (Clinical, Biological)
 Science (Large Hadron Collider / CERN)
 Entertainment / Sports (Sports Analytics)
 Internet (Social Media, Social Networks)
 Government / National Security
 It is very hard to find an area that does not have
some type of analytics application

7
Main Challenges of Analytics
 Talent Shortage
 New certificate and degree programs

 100s of new programs have emerged in the last

few years in the US and abroad


 Culture (old habits die hard)
 Justification of ROI
 Data (big, bigger, and more complex)
 Technology (handling big and complex data)
 Security and Privacy

8
What is Predictive Analytics?
PREDICTIVE
ANALYTICS

is the use of data, statistical algorithms and machine

learning techniques to identify the likelihood of future outcomes based

on historical data. The goal is to go beyond knowing what has

happened to providing a best assessment of what will happen in the

future.
What is Predictive Analytics?
 Business Analytics is the specific and intentional use
of Analytics to solve business problems.
 Predictive Analytics is the subset of Analytics that
deal with foreseeing what is future holds.
 What is more likely to happen? Why?

 Predictive Analytics versus Descriptive Analytics


 Descriptive  What happened?

 Predictive Analytics versus Prescriptive Analytics


 Prescriptive  What is the option/choice?

10
A Simple Taxonomy for
Business Analytics

11
A Simple Taxonomy for
Business Analytics

12
Benefits of Predictive Analytics
 Predictive Analytics turn
 Uncertainty about the future into
 Usable probability
 Learning from the data
 And Using that knowledge to action

13
Benefits of Predictive Analytics
 Better risk management
 During the transactions
 Not after the fact
 Managing complex tradeoffs
 Discovering unexpected patterns
 Better management of uncertainty

14
Why it matters?
Why it matters?

Detecting fraud- Combining multiple analytics methods can


improve pattern detection and prevent criminal behavior. As
cybersecurity becomes a growing concern, high-performance
behavioral analytics examines all actions on a network in real time to
spot abnormalities that may indicate fraud, zero-day vulnerabilities
and advanced persistent threats.
Why it matters?

Improving operations. Many companies use predictive


models to forecast inventory and manage resources.
Airlines use predictive analytics to set ticket prices. Hotels
try to predict the number of guests for any given night to
maximize occupancy and increase revenue. Predictive
analytics enables organizations to function more
efficiently.
Why it matters?

Reducing risk. Credit scores are used to assess a buyer’s


likelihood of default for purchases and are a well-known
example of predictive analytics. A credit score is a
number generated by a predictive model that incorporates
all data relevant to a person’s creditworthiness. Other
risk-related uses include insurance claims and collections.
Why it matters?

Optimizing marketing campaigns. Predictive


analytics are used to determine customer
responses or purchases, as well as promote cross-
sell opportunities. Predictive models help
businesses attract, retain and grow their most
profitable customers.
Who's using it?

Banking & Financial Services


-to predict the likelihood of fraud activity for any given transaction

Retail
-merchandise planning and price optimization to analyze the effectiveness of
promotional events and to determine which offers are most appropriate for
consumers.
Who's using it?

Healthcare
-Detecting sickness

Entertainment
-- Curating content
-Ex. Netflix
•The preferred genre of content.
•Search keywords when looking for content.
•Ratings.
•The preferred device to watch content.
•Dates watched, and in some cases, re-watched.
•Time spent watching content previews.
•When content is paused and at what point.
Who's using it?

cybersecurity
.- Detecting fraud

HUMAN RESOURCE
-- Predicting employee growth

-weather
-- weather patterns using satellite imagery and historical
data, we can see accurate estimates of weather forecasts

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